tv World Business WHUT March 2, 2010 6:00pm-6:30pm EST
>>abirached: this week on world business >>: the new guard is waiting in the wings, but will china's next generation of leaders lean more to the free market or populism. >>: we speak to the head of one of south east asia's biggest banks, nazir razak chief executive of malaysia's cimb >>: malaysia has the most developed legislative and regulatory framework for islamic finance >>: and a new voice for a new generation, why listening to and solving the problems faced by arab youth is crucial for the future of the middle east. >>: it's definitely unemployment, i think all young people are concerned about it and i would say it's the biggest challenge in the arab region.
>>abirached: hello and welcome. i'm raya abirached and this is world business, your weekly insight into the global business trends shaping o lives. the last decade has seen china emerge as a global economic power - and a more self assured political player on the world stage. this assertiveness is expected to intensify when a new generation of communist party leaders take the helm after 2012 when president hu jintao and premier wen jiabao retire. >>reporter: it's a very different china today than eight yeago when the current leadership prepared to take power. critics may lambast the environmental degradation, forced evictions, the summary quashing of dissent. but the economy has, frankly, flou but the economy has, frankly, flourished. even in 2009, while much of the world floundered, gdp growth here was 8.7 percent.
china is now the world's number one exporter - and boasts a foreign reserves stockpile of over two trillion dollars and counting. >>mccahill: this up from somewhere around 200 billion at the turn of the century. so it's a 10 or 12 fold increase. that's not a bad proxy for the amount of new wealth that's been created across the economy. >>reporter: so china is confident - and bullish. and a new generation of high officials is noticeably more assertive than its predecessors - especially when foreigners challenge china's position. this makes for more fractious, international relations - and tougher times for business. >>: a new-look government will take over after 2012. smiles aside, china's communist party is riven by factional in-fighting. the red faction, the hu -wen camp, wants more social policies to close the huge urban-rural income gap. while the blues, fans of the shanghai model, believe spurring industry, trade
and real estate delivers wider prosperity. >>: so as president hu and premier wen enter their last two years in office, the reds and blues are wrestling for influence - though blue xi jinping (pronounced shee jeen-peeng) is front runner for president and red li keqiang (pronounced lee kuh shee-ang) for premier. but others are staking claims - at least for the top body, the 9 member politiburo standing committee. these include former commerce minister, now chongqing (pronounced chong-cheeng) party secretary, bo xilai (pronounced boh shee-lie) and guangdong. province's top man, wang yang (pronounced wang yang). mr bo's a blue, mr. wang's a red. >>: and they've both launched high profile, populist campaigns on their turfs to rein-in abuse of power.corruption threatens the party's very survival. (9) >>mccahill: because it is systemic, it's rampant and almost obscenely colossal - in many cases it terribly erodes the credibility of the party in the eyes of t citenry.
>>reporter: with gripping stories of sex and gambling dens, loan sharking, mistresses and murder, the chongqing campaign, in particular, has ruffled feathers - as it roped-in officials and leading police officers- party members, with close connections across the country. for years, they either ran for years, they either ran mafia-style fiefdoms here or protected these enterprises for profit. >>mackie: it's not that chongqing is necessarily worse than other mainland cities. it's just that here, barefaced collusion between lawmakers and lawbreakers was exposed. there's been over 1200 arrests, with some 80 government officials prosecuted already - one a billionaire. the jails here are bursting to the seams. and one of the inmates is the former deputy police chief and head of the judiciary who somehow owned 4 mansions and millions of dollars in cash and gold. >>reporter: organised gangs here resorted to muscle and bribery to near-monopolise sectors of the mainstream economy.
and all this drives up costs for legitimate companies - and consumers. >>reporter: over golf practice, businessman yang ming (pronounced yang meeng) explains how the gangs operate. as a customer, he's free to use any transport firm to ship his factory's textiles to the coast. buno one dares compete with his haulier for the lucrative contract. >>ming: these people use the legal enterprises to fund illegal activities like money lending and centres forentertainment. and what makes the most money? i think they earn just 20 to 30 percent from transport; it's the other things that make the big money. >>reporter: as for bo xilai, his popularity has soared, nationwide, for launching the crackdown - though detractors bemoan that he's only jockeying for promotion. but this is primarily a law and order issue, ordered from the top. and other cities and provinces are expected
to follow chongqing's lead to smash the criminal fiefdoms. >>yongjian: it's the beginning of a nationwide criminal crackdown. this is the central governments' plan. bo xilai is both a local official and a senior officer of the central government. he is the commander of the action here. but it was not his idea. >>reporter: and we have no idea, as yet, how this will play out. a nationwide crackdown could sever many vital political alliances; even shed light on the business dealings of well connected families. there could well be, however, a distraction. the next leadership generationnn is expected to aggressively pursue china-first policies would rally the citizenry by stoking simmering nationalism. and so, for foreign companies operating with and within china, success in this market could well depend on their clear, loyal, support.
>>abirached: cimb is not only one of the biggest universal banking groups in its home country of malaysia, but also in south east asia generally. it reaches nearly two thirds of the population of asean and has thelargest network of retail branches in the region. >>reporter: despite the downturnhe cimb group has just announced a 43.8 percent jump in net profits for 2009. the bank already has a huge presence across asia and is a highly respected islamic bank, winning several awards last year including most innovative and best overall islamic bank. eckart sager spent some time with cimb's leader nazir razak and began by asking about the strength of the malaysian banking system. >>razak: i think the main dynamic of the malaysian banking system is the emergence of a strong card of domestic private banks if you like.
and we have gained tremendous market share relative to the global players over the years yeah. and i think we now are ready for full liberalisation and i think the government is clearly going that way. there is probably another round of banking consolidation to go and most recently a major, potential merger has been announced. i think that malaysia should have maybe about 5 or 6 banks. we have 9 today. thereafter, all banks need to realise that malaysia is a relatively small market in banking terms and one used to have economy of scale which is regional essentially. so what you will see is i think all malaysian banks becoming more and more asean. >>sager: you believe in the asean economy you are building
a regional bank, what role can malaysia play in a regional market place? >>razak: well i think it's about malaysian corporate being part of, the part of asean integration. malaysia actually has a unique position in that, we actually get on very well with all asean countries. we areoften the sort of friendly intermediary between different asean countries. we have strong access toall asean countries and i think our corporates are regionalising faster and more effectively than any other set of corporates and for cimb actually we are going to take it one step further, we are going to evolve as truly an asean business i think. our earnings complexion also we think by 2015 we'dlikely be more indonesian in terms of earnings than malaysian. and i think we are set to see even changes in our ownership
structure to deflect what would be a truly asean business with malaysian origins. >>sager: malaysia has clearly announced that wants to become an islamic financial hub. what are the key advantages and what is the status so far, have you positioned yourself effectively you think? >>razak: malaysia has the most developed legislative and regulative framework for islamic finance. we have done extremely well in my view, and i think that if you look at particularly the domestic islamic finance market it's the best in the world. our bond market today is about 60% sharia compliant, our consumer banking is about 15% sharia compliant. so but to me the biggest upside from islamic finance is actually getting a big part of the international islamic
finance market. malaysia has been doing quite well ther but a lot depends on the global islamic finance and how it evolves actually. >>sager: there is increasing competition though in some places in the gulf, even london: is that serious at this stage? >>razak: no, i think we are set to complement these other financial centres, i think we are going to be one of the global islamic financial centres and i think dubai, london and others will, we are quite positive about them evolving islamic finance because it actually means growing islamic financial industry. >>sager: because cimb has really established itself as a leading islamic investment bank. in fact how have you done that leap frog? >>razak: well we have beeconsistently acknowledged as the most active on the number 1 global islamic financial house driven by a strong record
in the sukuk market. the honest truth of it is that a large partof that trade record is actually in malaysia. because of the huge success of the malaysia sukuk market we have of course undertaken some very significant global deals including the recent, for the recent petronas sukuk, which is 1,5 billion us dollars. we've also brought kazanah. we've innovated the first international sukuk exchangeable point. and we are making headway globally but the great leap really has been on thringgit success. eckart sager given the global financial crisis especially now in the wake looking at new sort of financial architecture, what role can the islamic finance play?
>>razak: well i think we have a lot to learn. conventional finance has much to learn from islamic finance i think. it also... actually islamic finance teaches you to do business with a clear sight to ethics and integrity. i think that to me is the most important lesson one can derive; also islamic finance insures that finance is actually real always real and that is another issue that has emerged with, in the global financial crisis. innovation and excesses have been in finance, had been so detached fromwhat is real, what is needed for business. >>sager: thank you very much. i appreciate your time. >>razak: thank you.
>>abirached: still to come on world business... >>: dialogue between generations, why young people are being invited to take an active role in shaping the future of the middle east. >>: for example, in bahrain we started the youth programme and it's been a phenomenal success. >>: plus stand up paddling, the new board sport for old timers. >>: i'm 65 and it's really easy for me to go right after work, grab the board and go right out, paddle for 3 miles >>: taking a stand for fun...and the rest in just a moment on world business... >>abirached: the mena region has the world's youngest population. growing up they face many challenges- not leastthe fact that the region has the world's highest youth unemployment. so what should
be done? the arab thought foundation, one of the middle east's leading think tanks, believes that listening to whatthe young themselves have to say is a good place to start and, working with its youth programme, isdoing just that. >>reporter: kuwait city where the arab thought foundation, the region's leading forum on arab cultural and economic issues, held its eighth annual fikr conference. prince bandar bin khalid al faisal is a trustee of the arab thought foundation and chairman of the fikr executive committee. >>faisal: we hope to stir up discussions and introduce ideas and really try to bring together leaders of industry, economic decision makers in the arab world, decision makers and policy makers in the arab worldand try to get them to talk in an environment that out of it can perhaps come recommendations and some policies.
>>reporter: the foundation places particular importance in listening to, and acting on, input from the region's young. its youth programme is a pan regional grouping equally divided between men and women, all of whom have either been invited to attend after submitting essays and cvs or have come to the foundation's attention after displaying excellence in their chosen fields. >>ammari: for example in bahrain we started the youth programme and it's been a phenomenal success. we've doneso many things with youth. we used to have youth day and now youth are integrated into the conference. >>reporter: each year the foundation holds a youth cafe to brainstorm the issues its youth programme want the fikr conference to focus on. last year both atf founders, prince khalid al faisal and prince bandar, were in beirut for the cafe. as was samar samir mezghani. now twenty one she's already been recognised, twice, by the guinness book of records as the world's
younge writer. >>mezghani: we had over 60 young people attending and we had all the arab countries represented .... and also wehad the prince with us ... seeing him in beirut in 2009 was quite inspiring ... because people are interested to know more about what we're saying and doing. >>reporter: there's no question, according to samar, what the programme believes is the most urgent problem facing the region's youth. >>mezghani: it's definitely unemployment, all young people are concerned about it and i would say it's the biggest challenge in the arab region and it's something that we all have in common. >>reporter: the arab labour organisation puts regional youth unemployment at twenty six per cent. it varies fromcountry to country but with the world's fastest growing population the numbers seem set only to getworse. and it's a situation, according to sherif azer who works for the egyptian organisation for human rights, that has already seen some young people take drastic measures. >>azer: we can see very dramatic cases of young people trying
to escape the country through illegal routes, sometimes through crossing the land borders and some times crossing the sea, the mediterranean and sometimes they don't make it, they die en route, so you can tell how devastating this reality is. >>reporter: one thing, though, that will certainly help, participants argued at the conference during a special session devoted to youth issues - is an improvement in the region's education systems. yusr bahrainiwas invited to attend after submitting a paper on education. >>bahraini: i suggested having more practical training in schools and universities >>reporter: sultan al qassemi, chairman of the uae office of the young arab leaders, is also a great believer invocational education. >>qassemi: much of it should be vocational. you have some arab countries where a lot of the people who are working
in jobs such as plumbing or who are driving cabs they have possibly unnecessary qualifications. >>reporter: and prince bandar - one of the region's new generation of business leaders, agrees. >>faisal: having a work force that is relevant to meet the needs of human capital is crucial - and education is the key to all of this. >>reporter: one thing that makes this generation different is the arrival of social networking. the internet hada profound impact on the ability of the region's young to communicate, allowing them a voice that can now carry across borders. the youth programme's facebook web page has become a forum for the ongoing discussion and exchange of ideas. >>azer: it's a priority after each meeting with the youth that we are all on facebook and the most interesting thing about it is that when we meet again it's like there's been a continuous dialogue starting
from the last meeting. >>reporter: while there's no question that the young face many problems samar has a message for those who have given up on the possibility of positive change. >>mezghani: maybe you failed doing it a few tens of years ago but now it's a different concept ... because if westop trying of course we're going to fail but if we don't ste're g to fail but if we don't stop succeed -you never know. >>reporter: this year the foundation intends to step up the work with its youth programme with the appointment of young ambassadors to its board. it believes in the power of the young to shape their future and, in a region more frequently given to pessimism - such an attitude is a refreshing change. >>abirached: surfing is an exhilarating sport, but it's also a sport for the young. but many surfers are unwilling to give up on the water when the waves get too much to handle, which is why the more sedate sport of stand up paddling is on a roll. >>reporter: over the last 30 years there has been a boom in board sports - skateboarding made a comeback, snowboarding broke on to the scene, and surfing
captured a whole new generation and now stand up paddling,or s-u-p is creating waves. >>rief: it's spread now all over the world, it's virtually everywhere. >>warner: i've seen it absolutely explode i mean people are using it in freshwater, they're using it in lagoons, they're using it in lakes, the rivers. >>longley: all kinds of people, doctors, famous surfers, housewives, everybody really wants to be a part of that because it looks like so much fun. >>reporter: but this sport is actually far from being the new kid on the block, in fact it dates back as far as the 1950s, when tourist surfers came to hawaii and wanted locals to take pictures of them surfing. >>rief: the beach boys couldn't figure out how to take pictures of their clients if they had to lie down. sothey took canoe paddles, bigger boar, paddled these boards out, took pictures of their customers surfing with their little
brownies and that's really how it started. >>reporter: after 50 years in the dorums the sport has recently taken off. and the fan demographic is a littledifferent. >>warner: i've got a big customer base of women that have no intention of going in the ocean. they're gonna use it strictly for exercise, for workout, and people are developing specific workout programs just for stand up paddle boards. my customer base as far as men would be 30 to 50 and even beyond. i've sold a board to a 70-year old man before so the customer base is an older demographic, it gets them in the water much more than they normally would have been. >>longley: i'm 65 and it's really easy for me to go right after work,f, grab the board and go right oupaddle for 3 miles, it's real easy whether the conditions are good or bad that's what's so good about the sport. >>reporter: this older, wealthier demographic is an important one for surf retail, which traditionally relies onyounger customers. and with a 3-4 meter sup board costing up to 1600 dollars not including
paddles,pads and fins, it helps to have richer customers. >>rief: they know what they want, the goods are expensive, it's a sophisticated customer, it's a really goodthing for the hard-core retailer who's really into this and wants to service this. >>warner: you're not dealing with the younger guy that wants a really good deal on a board, you're dealing wi somebody that's most often a business person, that has some money in the bank and they look at this as something they're gonna be able to use, not just surfing but in so many different other venues. >>reporter: other venues like rivers, lakes and streams, meaning a whole new and much larger market has opened up for freshwater paddling. >>bradley: the sport going inland for us has meant a growth or an explosion in the market place. it means now we're selling surfboards in canada, we're selling surfboards in montana, these are places where the surf industry or this ocean oriented business wouldn't normally go.
>>repo >>reporter: c4 waterman was one of the first companies to focus their product development solely on sup. the hawaiian business began in 200d their sales have doubled each year since then. next on the agenda is to capitalize on what has become the sup lifestyle. >>bradle >>bradley: that's wre this sport and this industry and the market is growing in just accessorizing and comingup with new ways to enjoy getting on the water with, one, your family, more people. >>reporter: and if you thought this was an easy sport you'd be wrong - one of the hottest trends in sup is racing. battle of the paddle is held in southern california - in 2008 over 2000 people competed in or watched the event. last year that figure had more than doubled with over 5000 people on the beach or inthe water. >>longley: everyone was in shock on the first one a little bit because there was so much
interest and the second one was that much bigger, double, and everybody was kind of in awe. >>bradley: racing i believe is going to be a big part of stand up paddling because it has aspects that could probably go into the olympic arena. >>reporter: in fact for many it is the physically demanding aspect they find most attractive. >>english: this is an alternative to high-priced gyms and sweaty locker rooms so you spend a 1000 bucks on a board and it lasts you for a couple of years and you use it every day it pencils out to a pretty affordable sport. >>reporter: and a good workout. all that remains is for those on the business side to keep working on growing their profits. >>campbell: there's a lot of issues, takes up a lot of space in the shops, they're expensive to ship and move around so still kind of getting on their feet and learning how to make this work as a viable business and make some money from it. >>rief: with this demographic now we have a nice high end consumer and they're
interested in the sport and curious and now the question is how can we have the awareness, the demand, the supply, and the new customer intersect somehow? and that's really the business challenge for us. >>reporter: a challenge those in the business appear ready to face. >>abirached: that's it for this week's world business. thanks for watching. we'll see you again at the same time next week.